The European Central Bank (ECB) cut interest rates by another 0.25 percentage points, responding to a more favorable inflation outlook as rates eased from a peak of 10.6%. This shift marks a transition in policy amid challenges posed by a disappointing growth outlook and the necessity to stabilize inflation at its 2% target.
With inflation in the eurozone falling to 2.2% in August, from a previous peak of 10.6% in October 2022, the ECB's rate cuts reflect growing confidence among policymakers regarding economic stability and the effectiveness of their interventions to combat rising consumer prices.
European stocks rose sharply on the news, with the pan-European STOXX 600 index climbing by 1.2% as strong technology performances fueled investor optimism. The market rally was driven by expectations of an imminent interest rate cut from the US Federal Reserve.
ECB President Christine Lagarde emphasized that the rate-setting council's decision was influenced by signs of sustained downward paths for inflation, indicating a careful balance was struck between fostering growth and controlling rising prices in the eurozone.
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